SEVERANCE Litigation

New Developments

See Severance Articles  /  Good Reason Resignations

2019.11.27  Good Faith and Fair Dealing.  Principles of fairness generally entitle executives and other employees to collect bonuses and other performance-based compensation if applicable goals have been satisfied, as well as under the circumstance described in the next entry.  Applying Massachusetts law, the First Circuit affirmed . . .  continued at  Cash Bonus Litigation. 

2019.01.04  "Good Faith and Fair Dealing" re Performance Incentives. There may be claims for the recovery of equity or other incentive awards if an executive's employment is terminated before the imminent achievement of performance goal. However, that was not established in Suzuki v. Abiomed. In that case, a Mass. district court discussed several relevant decisions, and dismissed the executive's claims because the executive was neither "on the brink" of achieving the performance goal at the time his employment terminated, nor was the award "fairly earned and legitimately expected."  Note that the executive worked for Abiomed for 4 to 5 years and terminated employment 15 months before the relevant performance goal was arguably achieved. For a copy of the decision, send an email to Mark.

2018.12.17  No Enforcement of Non-compete; No damages for breach (CT law). It is generally smart for executives to narrow the scope of non-competes and non-solicits not only to the scope of their work but also to those with whom they have interacted.  That tipped the scales away from a former employer in Henkel v. Bell (ED Mich), which sets forth some instructive non-compete language. For a copy of the decision, send an email to Mark

2018.10.18  Eve of Vesting Termination - Equity Intervenes?  Following a stock purchase, an executive of the target company indicated his desire to leave when his employment agreement was scheduled to expire. The purchaser responded by terminating his employment one month beforehand, thereby preventing the executive from vesting in $425,000 of LTI benefits. The last paragraph of the 5th Circuit's decision seems to indicate . . . . continued with case link at  Stock Award and LTI Litigation.

2018.08.23 Moving the Bonus Plan Goalposts - Be Smart or Be Sued.  Whenever a company announces performance goals that apply to cash bonus, equity award, or vesting conditions, there is some risk that affected employees will later question the end-of-period determinations.  One recent lawsuit second-guesses the employer's financial calculations (alleging manipulation), and another involves Panera Bread's back-end addition of a maximum limit.  Well-drafted plans and programs include significant employer protections. But some defects can haunt, as shown in the cases discussed under  Litigation - Bonuses

2018.08.23 Forfeiture-for-Compensation Fails. In Lawson v. Spirit Aero, a Kansas court rejected an employer's effort to invalidate $50 million in stock awards held by its former CEO. Fatal to the employer's effort was a non-competition provision that the court found to be too narrow to cover the post-employment conduct that the employer found objectionable. This outcome -- evidenced by the excerpt below - reflects the general approach that employers should expect in litigation of this kind, namely: courts will enforce the letter of contractual commitments by executives, but will resolve ambiguities against the employer.

  • In defining the “Business,” instead of using a generic definition that would apply to the aircraft industry as a whole, Spirit references itself in the first person to refer to its actual business. [Quoted from Lawson v. Spirit Aero, page 13 of opinion]


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